The ceasefire has cost $29 billion. The bill is growing.

US–Iran War / Ceasefire ESCALATING

The Pentagon now puts war costs at $29 billion — $4 billion higher than it told Congress two weeks ago, and far below the $1 trillion Harvard estimates for full-term costs. Trump aides say he is now seriously weighing a return to combat operations, with the ceasefire described Monday as "on massive life support." Tehran continues to fire on commercial vessels and US Navy ships in the Strait of Hormuz, with Iran calling each US response a ceasefire violation. Hezbollah and Israeli forces traded fire in Lebanon on Tuesday, killing at least 13.

Strait of Hormuz HOLDING

Tanker traffic through the strait remains at roughly 5% of pre-war levels, with Iran channeling remaining traffic through its own corridor past Larak Island and charging tolls in Chinese yuan. The US blockade of Iranian ports, in effect since April 13, has halted an estimated 90% of Iran's seaborne trade. The UAE's main onshore gas processing facility won't return to full capacity until 2027 after Iranian strikes; a major oil spill off Iran's Kharg Island continues spreading. Oil futures are expected to stay above $100 a barrel in the coming weeks, according to the US Energy Department.

Trump–Xi Beijing Summit NEW

Trump landed in Beijing Wednesday for a two-day summit with Xi Jinping — the first US presidential visit to China since 2017. Discussions are expected to cover trade, Taiwan, AI, and the Iran war, though analysts expect limited deliverables. Trump brought more than a dozen CEOs, including Tim Cook and Elon Musk. Key watchpoints: an extension of China's rare-earth export reprieve, a "Board of Trade" framework for non-sensitive goods, and any language on Taiwan that Beijing could exploit. Xi meets Putin in Beijing days after Trump departs.

US Inflation / Fed ESCALATING

April CPI printed at 3.8% year-over-year — the highest since May 2023 and above the 3.7% forecast. Real wages fell 0.3% annually, the first negative reading in three years. The Senate confirmed Kevin Warsh to the Fed's Board of Governors on Tuesday by a 51–45 vote; a second vote to confirm him as chair is expected today, ahead of Jerome Powell's term ending Friday. Markets are pricing a one-in-three chance of a rate hike by December, with swaps showing better than 50% odds of a hike by April 2027.

Israel–Lebanon HOLDING

Israeli strikes in southern Lebanon on Tuesday killed at least 13 people, including a child, a woman, and a Lebanese army member. The IDF said it struck Hezbollah military targets while also intercepting rockets and drones fired into northern Israel, wounding two soldiers. The Lebanese health ministry reports 380 dead and 1,122 injured since the fragile ceasefire took effect April 17. Israel is also watching Washington's negotiations with Tehran carefully, fearing Trump could reach a deal that leaves key Israeli security concerns unresolved.

Global Energy Supply HOLDING

Global oil supply sits at roughly 97 million barrels per day — down from 107 million before the conflict — with cumulative supply losses now exceeding 400 million barrels. Gasoline has jumped roughly $1.50 a gallon since late February, with national averages forecast to average $3.88 for the year. IEA emergency stockpiles stand at approximately 1.2 billion barrels. Even if the strait reopens quickly, supply chain normalization is estimated to take two to six months at minimum.

Real Wages Went Negative. The Fed Just Changed Hands.

CONFIDENCE: HIGH

What

April CPI came in at 3.8% year-over-year — above the 3.7% forecast and the hottest reading since May 2023. Energy prices jumped 17.9% over the past year, with gasoline up 28.4% and fuel oil up 54.3%. Core CPI, which strips out food and energy, rose 0.4% for the month and 2.8% annually — both above expectations. The same day the data dropped, the Senate confirmed Kevin Warsh to the Federal Reserve's Board of Governors by a 51–45 vote. A second vote to confirm him as chair is expected today, ahead of Jerome Powell's term ending Friday.

So What

Real average hourly wages fell 0.3% annually in April — the first negative reading in three years. Workers made 3.6% more than a year ago; prices rose 3.8%. That gap is small but directionally bad, and it arrived at the same moment a new Fed chair is inheriting an inflation fight that hasn't been won. Warsh has publicly called for "regime change" at the Fed and believes rates can be lower. But markets are pricing a one-in-three chance of a rate hike by December and better than 50% odds of a hike by April 2027. Paul Tudor Jones put it plainly last week: "No chance" Warsh cuts. The FOMC that Warsh inherits just had the most dissents in nearly 34 years. What Trump wants from his new chair and what the bond market will allow are two different things — and the gap between them is widening.

Now What

Watch for Warsh's first public remarks as chair. The FOMC meets June 16–17. Any signal that he's willing to hike rather than hold — or that he's prepared to resist pressure from the White House — will move the 30-year Treasury, which has already broken above 5%. The May CPI prints June 10, ahead of that meeting.

Trump Lands in Beijing With Diminished Cards

CONFIDENCE: MODERATE

What

Trump arrived in Beijing on Wednesday for a two-day summit with Xi Jinping — the first US presidential visit to China since his own trip in 2017. The agenda covers trade, Taiwan, AI, and the Iran war. Trump brought more than a dozen CEOs, including Apple's Tim Cook and Elon Musk. Discussions include a proposed US–China "Board of Trade" covering non-sensitive goods in the double-digit billions, possible Chinese purchases of US agricultural products and Boeing aircraft, and an extension of the rare-earth export reprieve agreed at the Busan summit last October.

So What

Trump needs more from this summit than Xi does. The Iran war has run far longer than the four-to-six weeks the administration initially projected, the ceasefire is fraying, and approval ratings are at record lows. China, by contrast, holds several of the pressure points: it is Iran's largest trade partner, the primary buyer of Iranian oil, and the source of the rare-earth materials US defense and technology industries depend on. Beijing issued a "prohibition order" this month directing Chinese firms to ignore US sanctions on its oil refineries — a signal of where Chinese tolerance ends. Xi also meets Putin days after Trump leaves. The timing is deliberate. Analysts at CSIS say both sides want the strait open, but the diplomatic cost of the disruption falls more heavily on Washington.

Now What

Watch for any language on Taiwan. China's foreign minister told Rubio last month that Taiwan is "the biggest risk in the China-US relationship." Any ambiguity in Trump's public remarks — even a throwaway line — will be amplified by Beijing and land in Taipei as a signal. The rare-earth reprieve status will move markets; watch for a White House readout Thursday evening.

The War Cost Just Jumped $4 Billion in Two Weeks

CONFIDENCE: HIGH

What

Jay Hurst, performing the duties of Pentagon Comptroller, told Congress Wednesday that the Iran war has cost $29 billion to date — $4 billion more than the figure Pentagon officials provided two weeks ago. Replacing a Tomahawk missile inventoried at $2 million now costs up to $3.5 million. The US has 55,000 troops in the region. Harvard Kennedy School estimated in April the full conflict could cost $1 trillion when medium- and long-term costs are included: facility repairs over four to five years, restocking with higher-tech weapons systems, and veterans' care.

So What

The cost is accelerating faster than the official reporting — a $4 billion revision in two weeks suggests the internal tracking is lagging the actual burn rate. Defense contractors holding Tomahawk and interceptor contracts will be restocking at higher prices for years. But the broader fiscal issue is the one no one is pricing: a $1 trillion war cost lands on a balance sheet that the Congressional Budget Office already projects runs deficits above $1.8 trillion annually through the decade. The 30-year Treasury at 5% is in part a market verdict on that math. The war doesn't end the fiscal problem — it accelerates it.

Now What

Watch the next Pentagon comptroller update to Congress; the gap between reported and actual costs is widening. The next Treasury auction — particularly for 10- and 30-year paper — will signal whether the bond market is beginning to price war financing risk separately from the rate-hike conversation.

A Russian Ship Sank Off Spain in 2024. It Was Carrying Nuclear Reactors to North Korea.

In December 2024, a Russian state-owned heavy-lift vessel called the Ursa Major sank 60 miles off the coast of Spain after a series of explosions killed two crew members. Russia called it a terrorist attack and said nothing further. A CNN investigation published Tuesday tells a different story: Spanish investigators believe the ship was carrying components for two VM-4SG submarine nuclear reactors bound for the North Korean port of Rason. The captain eventually told investigators the manifest listing "two large manhole covers" was a cover for the reactor housings.

The implications reach well beyond one sunken ship. If the reactors had been delivered, North Korea would have had a material path toward nuclear-armed submarines capable of striking targets across the Pacific — an upgrade Kim Jong Un specifically requested in a 2021 weapons wish list. The transfer came two months after Kim sent 10,000 troops to support Russia's war in Ukraine, and Russia and North Korea had signed a mutual military aid pact. Spanish investigators believe the hull was pierced by a Barracuda supercavitating torpedo — a weapon possessed by only a handful of elite militaries. The US sent nuclear-detection aircraft over the wreck site twice in the past year.

The story was buried under seventy-plus days of Iran war coverage — which is precisely why it slid past. The strategic significance is significant: it confirms an active Russia–North Korea nuclear technology transfer pipeline, and it raises the question of what else has moved, or is moving, under the cover of this conflict's noise.

SOURCE: CNN Investigative Report, May 12, 2026; Euronews, May 13, 2026; Spanish government parliamentary statement, February 23, 2025

Three separate clocks are running at once. The Iran ceasefire is eroding by the day, with US aides now openly discussing a return to combat. Inflation is printing above forecasts and real wages just went negative for the first time in three years. And a new Fed chair takes control of monetary policy on Friday — one who wants to cut rates into an environment where the bond market is pricing hikes.

The Beijing summit adds a fourth variable. Trump arrives needing China's help on Iran, needing the rare-earth deal extended, and needing a trade win he can sell at home — all while Xi holds the leverage and Putin arrives in Beijing two days after Trump leaves. That sequencing is not coincidental.

On May 13, 1940, Winston Churchill stood before Parliament and offered his country nothing but "blood, toil, tears and sweat." He at least named the problem honestly. The gap between Washington's public accounting of this war — its cost, its duration, its end state — and what the underlying data shows is becoming too wide to paper over. Markets that are still near all-time highs have not yet priced what the bond market already knows.

Read time: ~4 min

The Recon Report  ·  Daily Intelligence Briefing